Case For Rate Cuts Beyond 50 Basis Points By RBI Has Faded: Macro Mosaic Investing's Maneesh Dangi

The Reserve Bank of India is expected to announce a 25-basis-point repo rate cut on June 6, at the end of the meeting of its Monetary Policy Committee (MPC), according to Maneesh Dangi, Founder of Macro Mosaic Investing and Research.

The three-day RBI Monetary Policy Committee meeting started on June 4.

Commenting on the speculations of a 50-bp cut in the key lending rate by the apex bank, Dangi told NDTV Profit that a 25-basis-point rate cut is “given”.

“Just giving the growth inflation context— the growth, given that it's actually picked up a bit, inflation, which is likely going to be 4% or below— you can assume that there is more space than what many are sort of anticipating. This 25-basis-point cut is given,” Dangi said in a conversation with NDTV Profit on Wednesday.

However, commenting on another rate cut in August, he said that the case for substantial rate cuts beyond the 50 basis points has “actually faded”.

“Likely another 25 basis points will come in August. But then, the moment you start to see that the growth is accelerating again, not in sort of a very sharp way, but at least, you know, it's not falling anymore... It's certainly sort of improving its margin. In the context that the liquidity has eased so much, rates have come off substantially. This means that the case of substantial rate cuts beyond the 50 basis point has actually faded,” he explained.

He outlined substantial liquidity infusion, which has eased pressure on credit markets. “It's been absolutely phenomenal,” the analyst said, commenting on the regime under incumbent RBI Governor Sanjay Malhotra.

He referred to the RBI's approach under Governor Malhotra as the “Malhotra headset”. “He can tease you a little bit more by an additional 25 to 50 basis point rate cut…erring on the side of more easing and being dovish.”

Dangi highlighted that while bond and credit markets are already reflecting the RBI's easing measures, equity markets have been slower to respond. “Equity is generally a slow vehicle to absorb monetary policy news. Bonds are a little bit closer neighbours to a monetary policy,” he said. 

The seasoned market observer said that rate-sensitive sectors could outperform over the next six to 18 months as the market digests the new monetary reality. However, he cautioned that equities are not yet pricing in a "new normal" of sustained easy liquidity.

On valuations, Dangi described the market as "not cheap, not very expensive.” He warned that expensive valuations in certain segments could continue to face pressure, with fund managers likely to remain cautious after being burned by high-valuation assets over the past two years.

He identified banking and financials, including non-banking financial companies (NBFCs), as potential outperformers. Dangi underlined that recent liquidity easing should translate into improved net interest margins (NIMs) within three to six months. Additionally, he highlighted the Indian tech sector, driven by AI-led productivity gains.

The market expert described the current equity market scenario as "boring" but "okay”. Dangi noted a lack of exuberance in Indian markets compared to global peers, which have reclaimed past peaks.

While quarterly corporate performance has been decent and trade-related fears, such as tariff concerns, have subsided, valuations in certain pockets remain high, particularly for multinational corporations, he outlined.